How Twitter Will Make Money

The topic of how Twitter might make money is so popular these days that people are writing Onion-like parodies of news stories announcing Twitter’s plans. That particular story was a really popular link on Twitter today.

But the question remains: how will Twitter make money? I think I know at least one of the ways they’ll do it, and I’m surprised that more people aren’t talking about this.

I discovered a service called I Want Sandy a year or two ago and became a user almost immediately. The gist of the idea: Sandy is your virtual assistant, reminding you of tasks and appointments as you like. The interesting part wasn’t just that Sandy kept your calendars and to-do lists organized, but that she did it all through a human-readable text-based interface. I could send Sandy an email saying something to the effect of, “Remind me to buy milk tomorrow at 5pm” right in the subject line of the email. (I believe she also had an IM interface, and of course a web interface.) And sure enough, tomorrow at 5pm I would get an SMS message (if that was my preferred method of communication) that reminded me to buy milk. Simple. Human. Useful! I found myself being confident to take on tasks and make promises knowing that I wouldn’t forget things. Sure, I’ll ping you next Tuesday about that. (Send message to Sandy.) Oh, your birthday is when? (Send message to Sandy.) You get the idea.

When Twitter came around, the folks at I Want Sandy were smart enough to register the ultra-short @s Twitter name and allow people to send messages to Sandy through that interface. I was already on Twitter and it was a convenient way to augment the service. I could be reminded of events and to-dos through Twitter direct messages too, instead of just SMS and email.

Fast-forward to November 2008. The company who runs I Want Sandy, Values of n, announced that they were purchased by Twitter. And the CEO, Rael Dornfest, became a Twitter User Experience engineer. Aha! I Want Sandy went offline in December 2008 and is no longer functional.

It seems nearly a sure thing to me that if Twitter has acquired all the intellectual property behind I Want Sandy that they’ll be integrating it with the service. It seemed to work so well that I’m not sure how they’d improve it besides tightening and deepening the service’s integration with twitter.com, but we’ll see. I’d love it if they offered it for free to make Twitter more palatable and useful to more people, but I could easily see paying $1 / month to get reminders from Twitter over SMS (or whatever) because I personally know how useful they were to me, and I know the gaping hole their absence has left. Twitter has stated that they won’t be reducing the value of their service by charging for Twitter features that are currently free. This would certainly be something over and above what is built into Twitter, and offering it as a premium, for-pay service wouldn’t reduce the value of Twitter in anyone’s mind.

So that’s my guess on at least one way they’ll make money. We’ll see if I’m right!

4 Comments

  1. Posted March 19, 2009 at 2:23 pm | Permalink

    Another assumption could be that they just liked the guy that made Sandy and wanted that “talent”. They could of easily ripped off what Sandy was doing there and made it themselves since they own the basic platform.

    Thats the problem anyone has in building off of twitter. They’re using twitter and basically spending time and energy to find a way to make a living off of twitter, and thats fine, but they are building off the ground work of twitter. So twitter hangs out, play with our API, show us new tricks, and then they get to debate on implementing those very tricks. What they cant do that, thats my idea right? Well it is sure, but its build off their foundation.

    So I doubt they bought Sandy to get “Sandy”. They had Sandy all along, they bought Sandy to get the man who made it. The vision and talent of that man made them think, and that is what they wanted.

    As for how Twitter makes money, time will tell but I bet it wont be thru conventional means, ie, not advertising, not selling paid accounts.

  2. David Schlenk
    Posted March 19, 2009 at 2:30 pm | Permalink

    Twitter will make money by selling itself to someone else who will then realize there’s no money in it. Probably not yahoo this time but maybe google who would then add text ads to it and also use it to provide another place to scrape metrics from to give you more accurate ads.

  3. Posted March 19, 2009 at 8:14 pm | Permalink

    Dan, I can totally see what you’re saying, and you could be right. But I don’t think you are, and this is why: Twitter wouldn’t have acquired Values of n’s properties if they didn’t want them. They could’ve hired Rael without buying Sandy. Rael could’ve sold Sandy to someone else or kept Sandy running on Twitter separately.

    But the reality is that Sandy’s doors are closed and the service is gone. Why shut it down if it’s so easy to do and so easy to keep running?

    I’m telling you, something along those lines is in the works.

  4. Posted March 19, 2009 at 8:58 pm | Permalink

    The problem is Twitter either needs to: a) get acquired, and not have to worry about making money, or b) make large sums of money at some point 2-3 years from now to make their VC’s happy.

    If a doesn’t happen (which is perhaps unlikely), the only way to achieve b is through something new that hasn’t been done — it’s unlikely to be premium user accounts or advertising. Here’s why… If Twitter grows to be the size of Facebook in 2 years (150 million users), which might be a big if, and if they can then convince 10% of those users to sign up for a premium account (most “freemium” services can only pull 1.5-5% of users), 15 million users paying $1/month won’t cut it. That’s a lot of money to you or I, but it’s very unintersting to the VC’s involved.

    I think the Sandy acquisition was just a talent grab. Sure they would’ve just hired him if they could’ve, but he didn’t want a job, or he didn’t want it without the premium $ the acquisition brought him. It was a talent grab in the same way the Six Apart acquisition of Pownce was a talent grab — only a much smaller scale.